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Monday, March 16, 2009

Managing Risk with Contingency Plans and Workarounds

Eleanor Roosevelt once said, "What you don't do can be a destructive force." This is especially true in terms of risks. Leaving risks to run their course without taking action can be very destructive to your project.

When a risk occurs, you must take corrective action to harness the risk and lead it down the least destructive path. In project risk monitoring and control, two of the most helpful forms of corrective action are contingency plans and workarounds.

Contingency plans
Contingency plans are management plans that identify alternative strategies project teams can use to ensure project success if specified risk events occur. They are developed before the risk occurs and are used if the original risk response is not effective. Contingency plans go beyond the original risk response to address "what if" scenarios that may further complicate risk control efforts. Risks that pose a significant threat to the project should have a contingency plan.

Contingency plans should contain information such as the plan's objective, criteria for implementation, roles and responsibilities, and the details for implementation.

Untouchable Tires is producing winter tires to stock its retail outlets. During this project, the company has encountered a major risk. The employees have gone on a strike that has lasted longer than the company had originally anticipated. The original response was to negotiate with the employees to get them back on the job as soon as possible.

To ensure that production deadlines are met and that retail orders can be filled, the company reassigned the work that would be done at this factory to other factories nearby. It will make production more expensive, but it will help meet the deadlines.

Workarounds
Another type of corrective action is a workaround. Workarounds are unplanned responses to emerging risks that weren't accepted or identified. Workarounds give you a way to "work around" the problem and as a result, reduce the effects that the risk has on the project. Workarounds should not be applied without documentation. Since using workarounds may have a positive or negative effect on the project, you need to incorporate them into the project plan and risk response plan.

Corrective action is any action taken to bring expected future project performance in line with the project plan. Implementing corrective actions such as contingency plans and workarounds will help your company keep its project performance in line with the project plan.